China's Economy Grows 6.9% in First Quarter

China is expected to report on Monday that its economy grew 6.8 percent in the first quarter, well above Beijing's full-year target, buoyed by surging government infrastructure spending and a gravity-defying property market that is showing signs of overheating.

"The national economy in the first quarter has maintained the momentum of steady and sound development", the National Bureau of Statistics said in a statement.

China's gross domestic product (GDP) accelerated at an annualized 6.9% in January-March, higher than the 6.8% forecast by economists, government data showed Monday.

Currently, China produces almost half of the world's steel and has seen a remarkable increase of 1.8 percent compared to past year.

Value-added industrial output, a rough proxy for economic growth, expanded by 7.6% in March, compared with a 6.3% increase in the first two months of 2017.

The gap between nominal GDP growth and credit growth was often cited as the strongest quantitative argument that China's growth model is unsustainable.

"It shows that China's policies encouraging private investment, intensifying reform and protecting private property rights have worked".

"China's fundamental demand for coal and natural gas has improved alongside better-than-expected economic growth in the first quarter", Tian Miao, an analyst at North Square Blue Oak Ltd in Beijing, said by phone. Growth in both areas has accelerated from a year ago and helped offset slightly weaker growth in the services sector.

New-home prices, excluding government-subsidized housing, gained last month in 62 of the 70 cities tracked by the government, compared with 56 in February, the National Bureau of Statistics said on Tuesday.

GDP was up 1.3 percent on a quarter-on-quarter basis.

"There's no doubt that China will achieve the (GDP) target", said Xu of the figure of at least 6.5 percent this year. According to a survey, China has been able to generate 3.34 million job opportunities in the first quarter of the year.

Authorities who were once concerned that strict regulation would dampen economic growth will no longer hesitate to take stronger measures in financial and real estate controls, said Deng Haiqing, chief economist with JZ Securities.

Even as top officials vowed to crack down on debt risks, China's total social financing, a broad measure of credit and liquidity in the economy, reached a record 6.93 trillion yuan ($1 trillion) in the quarter - roughly equivalent to the size of Mexico's economy.

Retail sales increased 10.9 per cent from a year earlier in March, compared with a Bloomberg forecast of 9.7 per cent.

"The growth beat general expectations; it seems no one had anticipated such strong growth", said Zhu Baoliang, an economist from the State Information Center. Retail sales meanwhile increased by 10.9% y/y - a three-month high.

  • Joanne Flowers